Tax Insights: Targeted COVID-19 business supports introduced and Canada Recovery Hiring Program extended to May 2022

Issue 2021-26

In brief

On October 21, 2021, the Deputy Prime Minister and Minister of Finance, Chrystia Freeland, announced proposed changes to the federal COVID-19 business support programs. To coincide with the October 23, 2021 expiration of the Canada Emergency Wage Subsidy (CEWS) and Canada Emergency Rent Subsidy (CERS) programs, the federal government proposes to:

• introduce the Tourism and Hospitality Recovery Program (THRP) and the Hardest-Hit Business Recovery Program (HBRP) to support specific types of organizations

• provide support to other (non-THRP or HBRP) qualifying businesses that face new local lockdowns due to public health restrictions at the subsidy rates as calculated under the THRP

• extend the Canada Recovery Hiring Program (CRHP) to May 2022 and increase the subsidy rate, effective October 24, 2021

The two new subsidy programs are proposed to be effective from October 24, 2021 to May 7, 2022.

In detail

The CEWS and CERS programs expired on October 23, 2021. The government has replaced them with two proposed new programs with the aim of providing targeted support to organizations, which are in the tourism and hospitality industry or have been and continue to be severely affected by the COVID-19 pandemic. The government also proposes to support organizations that are subject to new lockdowns due to public health restrictions. The federal government intends to implement these new programs by regulation for claim period 22 (October 24 to November 20, 2021), and then introduce legislation to extend the new programs to May 7, 2022; the government will also seek legislative authority to further extend the programs to July 2, 2022, should it be required due to the economic and public health situation. 

Tourism and Hospitality Recovery Program (THRP)

The THRP will provide a wage and rent subsidy to qualifying businesses in “selected sectors of the tourism and hospitality industry that have been deeply affected since the outset of the pandemic and that continue to struggle.” The program is proposed to be available October 24, 2021 to May 7, 2022, and will offer a wage and rent subsidy rate of up to 75% of eligible remuneration and eligible expenses, respectively, until March 12, 2022, and 37.5% thereafter.

Eligibility

To be eligible for the THRP, an organization must operate in yet-to-be-detailed sectors of the tourism and hospitality industry. Examples of qualifying businesses include:

• hotels 
• tour operators and travel agencies
• restaurants and bars
• festivals
• convention centres and convention and trade show organizers

The government will provide additional details on the definition of a qualifying business at a later date. 

To qualify for the THRP, a business must have experienced both:

• an average monthly revenue reduction percentage of at least 40% over claim periods 1 to 13 of the CEWS (the 12-month revenue reduction)*

• a 40% revenue loss for the current month, as calculated under the existing rules put in place for the CEWS (the current month revenue reduction)

^{*The 12-month revenue reduction is calculated as the average of the revenue reduction percentages from March 2020 to February 2021 (i.e. claim periods 1 to 13 of the CEWS, excluding claim period 10 or 11, given that both use the same reference period); the calculation excludes any claim periods in which the entity was not carrying on business, except for a public health restriction (e.g. a seasonal business). It should be calculated using the rules that were put in place in respect of each of the above-mentioned CEWS claim periods.}

Subsidy rate

The THRP subsidy rate will be determined based on the revenue reduction percentage calculated for the claim period, using the existing CEWS/CERS rules, and will still include the additional Lockdown Support subsidy of up to 25% of eligible expenses (as determined under CERS). The proposed rate structure for the THRP is summarized in Table 1.

Table 1 - THRP wage and rent subsidy and Lockdown Support rate structure that applies for periods 22 to 28

1. The wage subsidy does not apply to furloughed employees.

2. The maximum wage subsidy for:

   • periods 22 to 26, is $847 per week per active employee (maximum wage subsidy rate of 75% x maximum $1,129 of eligible remuneration paid)

   • periods 27 to 28, is $423 per week per active employee (maximum wage subsidy rate of 37.5% x maximum $1,129 of eligible remuneration paid)

3. The maximum expense to which the base rent subsidy rate can apply is $75,000 per location, subject to an overall cap of $300,000 (proposed to increase to $1 million for organizations that meet the eligibility requirements for the rent subsidy under the THRP or HBRP, as discussed below) that must be shared among affiliated entities.

4. The maximum expense to which the Lockdown Support subsidy rate can apply is $75,000 per location, with no overall cap. 

5. The Lockdown Support subsidy rate for a qualifying property is prorated based on the number of days in the claim period that the qualifying property was subject to a “public health restriction.” The percentage is determined separately for each qualifying property. 

Hardest-Hit Business Recovery Program (HBRP)

The HBRP will provide a wage and rent subsidy to “[h]ard-hit organizations that do not qualify for the [THRP] and that have been deeply affected since the outset of the pandemic.” The program is proposed to be available October 24, 2021 to May 7, 2022, and will offer a wage and rent subsidy rate of up to 50% of eligible remuneration and eligible expenses, respectively, until March 12, 2022, and 25% thereafter.

Eligibility

To qualify for the HBRP, a business must have experienced both:

• an average monthly revenue reduction percentage of at least 50% over claim periods 1 to 13 of the CEWS (the 12-month revenue reduction)*

• a 50% revenue loss for the current month, as calculated under the existing rules put in place for the CEWS (the current month revenue reduction)

^{*As with the THRP, the 12-month revenue reduction is calculated as the average of the revenue reduction percentages from March 2020 to February 2021 (i.e. claim periods 1 to 13 of the CEWS, excluding claim periods 10 or 11, given that both use the same reference period), excluding any claim periods in which the entity was not carrying on business, except for a public health restriction (e.g. a seasonal business). It should be calculated using the rules that were put in place in respect of each of the above-mentioned CEWS claim periods.}

Subsidy rate

As with the THRP, the HBRP subsidy rate will be determined based on the revenue reduction percentage calculated for the claim period, using the existing CEWS/CERS rules, and will still include the additional Lockdown Support subsidy of up to 25% of eligible expenses (as determined under CERS). The proposed rate structure for the HBRP is summarized in Table 2.

Table 2 - HBRP wage and rent subsidy and Lockdown Support rate structure that applies for periods 22 to 28

1. The wage subsidy does not apply to furloughed employees.

2. The maximum wage subsidy for:

   • periods 22 to 26, is $565 per week per active employee (maximum wage subsidy rate of 50% x maximum $1,129 of eligible remuneration paid)

   • periods 27 to 28, is $282 per week per active employee (maximum wage subsidy rate of 25% x maximum $1,129 of eligible remuneration paid)

3. The maximum expense to which the base rent subsidy rate can apply is $75,000 per location, subject to an overall cap of $300,000 (proposed to increase to $1 million for organizations that meet the eligibility requirements for the rent subsidy under the THRP or HBRP, as discussed below) that must be shared among affiliated entities.

4. The maximum expense to which the Lockdown Support subsidy rate can apply is $75,000 per location, with no overall cap. 

5. The Lockdown Support subsidy rate for a qualifying property is prorated based on the number of days in the claim period that the qualifying property was subject to a “public health restriction.” The percentage is determined separately for each qualifying property. 

Support for other businesses during a public health lockdown

Qualifying businesses, regardless of industry sector, that are subject to a qualifying public health restriction (i.e. lockdown) from October 24, 2021 to May 7, 2022, will be eligible for a wage and rent subsidy during the lockdown, at the same rates as determined under the THRP. 

Eligibility

To qualify for this support, an organization must have:

• at least one location subject to a public health restriction, which lasts for at least seven days in the current claim period that requires them to cease activities that accounted for at least approximately 25% of total revenues during the prior reference period

• a current-month revenue reduction (as opposed to the 12-month revenue reduction required for the THRP and the HBRP) of at least 40%

Subsidy rate

The subsidy rate will be determined based on the current-month revenue reduction percentage, which is calculated using the existing CEWS rules. The proposed rate structure will be the same as for the THRP (see Table 1 above). 

Monthly cap on eligible expenses under the rent subsidy

With respect to the rent subsidy (previously known as CERS), which forms part of the THRP and HBRP, eligible monthly expenses are capped at $75,000 per location, subject to an overall cap of $300,000 that must be shared among affiliated entities. The federal government proposes to increase the overall cap from $300,000 to $1 million for organizations that meet the eligibility requirements for the rent subsidy under the THRP or HBRP, effective October 24, 2021.

Canada Recovery Hiring Program (CRHP)

The federal government proposes to introduce legislation to extend the CRHP from November 20, 2021 to May 7, 2022; the government will also seek legislative authority to further extend the program to July 2, 2022, should the economic and public health situation warrant it. 

Subsidy rates

The government also proposes to increase the CRHP subsidy rate to 50% of additional eligible salary or wages (from the current period 22 rate of 20%), for all eligible employers with current revenue losses above 10%, effective October 24, 2021. 

The takeaway

The introduction of the THRP and HBRP are helpful developments for businesses in struggling sectors who are trying to retain employees and manage operational costs. The new targeted programs will also provide some economic stability for all affected businesses in the event of further pandemic-related lockdowns. The extension of the CRHP should continue to help spur a return to broader employment for employers and employees who have been impacted by the pandemic.